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Small And Medium Scale Enterprise

Small and medium-scale enterprises (SMEs; sometimes also small and medium
enterprises) or small and medium-scale businesses (SMBs) are businesses whose personnel
numbers fall below certain limits. International organizations such as the World Bank, the United
Nations and the World Trade Organization (WTO) use in the European Union and the abbreviation
SME. Small enterprises outnumber large companies by a wide margin and also employ many
more people. SMEs are also said to be responsible for driving innovation and competition in many
economic sectors.
Petrakis and Kostis (2012) explore the role of interpersonal trust and knowledge in the number of
small and medium enterprises. They conclude that knowledge positively affects the number of
SMEs, which in turn, positively affects interpersonal trust. Note that the empirical results indicate
that interpersonal trust does not affect the number of SMEs. Therefore, although knowledge
development can reinforce SMEs, trust becomes widespread in a society when the number of SMEs
is greater.
The Government of India enacted the Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006 including definitions of micro, a small and medium enterprise as follows.
Enterprises engaged in the manufacture or production, processing or preservation of goods as
specified below:
A micro enterprise is an enterprise where investment in plant and machinery does not

exceed Rs. 25 lakh;

A small enterprise is an enterprise where the investment in plant and machinery is more


than Rs. 25 lakh but does not exceed Rs. 5 crore; and
A medium enterprise is an enterprise where the investment in plant and machinery is
more than Rs.5 crore but does not exceed Rs.10 crore.

In case of the above enterprises, investment in plant and machinery is the original cost excluding
land and building and the items specified by the Ministry of Small Scale Industries vide its
notification No.S.O.1722 (E) dated October 5, 2006.

Enterprises engaged in providing services are defined by their level of investment in equipment

as follows:
A micro enterprise is an enterprise where the investment in equipment does not exceed Rs.


10 lakh;
A small enterprise is an enterprise where the investment in equipment is more than Rs.10


lakh but does not exceed Rs. 2 crore; and

A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2
crore but does not exceed Rs. 5 crore.


Investment in equipment

Micro Enterprises

Does not exceed ten lakh rupees,

Small Enterprises

More than ten lakh rupees but does not exceed

Medium Enterprises

two crore rupees

More than two crore rupees but does not exceed
five crore rupees

Why SMEs Are More Adoptable?


Simple to


Low risk


n and


Types Of SMEs
SMEs have been established in almost all-major
sectors in the Indian industry such as:
Food Processing
Agricultural Inputs
Chemicals & Pharmaceuticals
Engineering; Electricals; Electronics
Electro-medical equipment
Textiles and Garments
Leather and leather goods
Meat products
Sports goods
Plastics products
Computer Software, etc.

Contribution Of SME In India

The Indian SME market is worth $5 billion.

There are over 11 million SME units in India that produce more than 8,000 products.

SME's Contribution towards GDP in 2011 was 17% which is expected to increase at the rate
of 22% by 2012.

SMEs are the fountain head of several innovations in manufacturing and service sectors, the
major link in the supply chain to corporate and the PSUs. By promoting SMEs, the rural
areas of India will be developed.

Importance Of SMEs

Employment generation
Use of local resources

Balanced regional development

Promoting exports

Reason Behind Survival & Growth Of Smes In Indian Economy

Govt. policy, tariff and easy loan with low interest rate for SMES in help to grow these

Foreign and local fund providers are taking huge interest in the small and medium
enterprises of India.

Banking sector has also shown a keen interest in lending credit to these enterprises.

Technological growth is also a factor for growth of SME's in India as there are several trade
portals and BUISNESSESS DIRECTORIES available online with huge database of
buyers, sellers, manufacturers who are basically back bone of SME's.

The sector has contributed impressively towards job creation and increase in individual

Challenge Ahead For SMEs

Infrastructure needs to be developed for setting up the SMEs in the rural sector of the
country. Transportation, electricity and communication are the main parts of the
infrastructure required.

Technology need to be evolved so that quality products are manufactured by the sector.

Lack of information about the inputs, including raw material, machinery and skills, is one
critical challenge in front of the owners of these enterprises.

High level of research and development is required

Scheme Of Govt. Of India For SMEs

Rajiv Gandhi Udyami Mitra Yojna ( RGUMY)

Marketing Assistance ( Bar Code)

ISO 9000/14001 Certification Fee Reimbursement Scheme

Micro & Small Enterprises Cluster Development Programmed

Credit Linked Capital Subsidy Scheme

Quality Management Standards/Quality Technology Tools

Intellectual Property Rights for MSMEs